A break-even analysis compares income from sales to the fixed costs of doing business. The five components of a break-even analysis are fixed costs, variable costs, revenue, contribution margin, and the break-even point (BEP). Contribution margin reveals how much money remains from sales after covering variable costs, and it highlights the resources available to pay for fixed costs and yield profit. The contribution margin represents the portion of a product's sales revenue that isn't used up by variable costs, and so contributes to covering the company's fixed costs. The contribution margin at the break-even point is crucial for every business to maintain its cash flow properly.

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